Portuguese Banks with potential to securitize NPL

The Portuguese banks have potential to complete more non-performing loans portfolios securitization operations, following the European trend on using these financial instruments, noted the rating agency DBRS.

According to Alessio Pignataro, Senior Vice President, European ABS – Global Strucutured Finance, Portugal, Ireland and Italy are the countries were DBRS expects the banks to use these financial instruments to reduce a still high volume of non-performing loans (NPL), besides the new entries of Spain, Greece, Cyprus and, potentially, the United Kingdom.

«From a banking perspective, this measure enables faster NPL reduction and frees the management teams to focus on new businesses», Elisabeth Rudman, managing director and head of EU FIG told to Portuguese news agency Lusa, on the sidelines of a DBRS event about the theme in London.

Since 2016, the Portuguese banks completed two deals, a small number when compared to the 20 NPL securitization done by Italian banks and four other by Irish banks during the same period.

One of the Portuguese deals was led by Caixa Económica Montepio Geral when it sold the €580.6 million NPL portfolio “Evora Finance” in 2017, and the other one was closed last year by Santander Total bank, when disposed a €480.7 million NPL portfolio. DBRS rated both transactions “BBB” (low), noting though that “Évora Finance” is performing well above the initial forecast.

The rating agency also states the European Banks have made substantial progresses in reducing the huge NPL pile accumulated since the financial crisis, but several countries whose banks still have huge levels of NPL «still have a long way to go».

Legal and tax reforms were implemented in Portugal to help dealing with this problem but, in general the European banks keep struggling to collect outstanding debts and foreclose mortgages, besides the low yield profitability and pressures over the capital levels.

Original Story:Diário de Notícias | Lusa 
PhotoFree /Alfonso Romero
Edition and Translation:Prime Yield